Correlation Between California Bond and Capital World
Can any of the company-specific risk be diversified away by investing in both California Bond and Capital World at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining California Bond and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between California Bond Fund and Capital World Growth, you can compare the effects of market volatilities on California Bond and Capital World and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in California Bond with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of California Bond and Capital World.
Diversification Opportunities for California Bond and Capital World
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between California and Capital is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding California Bond Fund and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and California Bond is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on California Bond Fund are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of California Bond i.e., California Bond and Capital World go up and down completely randomly.
Pair Corralation between California Bond and Capital World
Assuming the 90 days horizon California Bond is expected to generate 1.45 times less return on investment than Capital World. But when comparing it to its historical volatility, California Bond Fund is 1.77 times less risky than Capital World. It trades about 0.22 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 6,696 in Capital World Growth on September 1, 2024 and sell it today you would earn a total of 149.00 from holding Capital World Growth or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
California Bond Fund vs. Capital World Growth
Performance |
| Timeline |
| California Bond |
| Capital World Growth |
California Bond and Capital World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with California Bond and Capital World
The main advantage of trading using opposite California Bond and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if California Bond position performs unexpectedly, Capital World can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Capital World will offset losses from the drop in Capital World's long position.| California Bond vs. Income Fund Income | California Bond vs. Usaa Nasdaq 100 | California Bond vs. Intermediate Term Bond Fund | California Bond vs. Usaa Intermediate Term |
| Capital World vs. Income Fund Of | Capital World vs. New World Fund | Capital World vs. American Mutual Fund | Capital World vs. American Mutual Fund |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. |